A Water Enterprise Fund (EF) issues $4 million of 5% revenue bonds on October 1, 2018. The EF will make its first payment of interest on March 31, 2019, together with a principal payment of $200,000. What amount, if any, should the EF report in its fund statement of revenues, expenses, and changes in net position for the year ended December 31, 2018?

Question

Quizplus · Accepted Answer

Enterprise Fund expenses, including interest, are reported on the full accrual basis of accounting. Only governmental fund types report principal payments in their operating statements. In this case, the Enterprise Fund accrues 3 months' worth of interest expense ($4,000,000 x 0.05 x 3/12 = $50,000).

A Water Enterprise Fund (EF) Issues $4 Million of 5